An operating expense ‘Cap’, also referred to as an ‘expense increase limit’ or ‘expense stop’, is regularly included in the landlord-tenant lease in order to reduce the potential increase in operating expense liability to the tenant. From the tenant’s perspective, an expense Cap provides assurance in controlling their proportionate share of the property’s annual operating expense increase. From the landlord’s perspective, a Cap on property operating expenses may increase their liability in that expenses exceeding the defined Cap amount would not be recoverable.
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